Wed, 24 Jul 1996

Separate worlds of the rich and the poor is widening

By Jonathan Power

TOKYO (JP): Eighty-nine countries are worse off economically than they were ten years ago. Since there are only 160 countries (with a usable data base) in the world this statistic contained in the Human Development Report published here in Tokyo last week by the United Nations Development Program is startling and damning, but most of all worrying since it is a predicament that could have been largely avoided.

This tale of woe has many causes. In part it was the fall-out from the 1973 and 1979 oil price hikes. In part it was lengthened and deepened by the recession of the 1980s that struck most of the industrialized countries and sent out shock waves to all their Third World trading partners. In part it was a spread of domestic-made maladies, ranging from civil war to natural calamities, to over-concentration on price-weak commodities, to economic and political mismanagement.

In 19 countries, including not only war-torn Haiti, Lebanon, Liberia, Nicaragua, Rwanda and Sudan, but also such countries as peaceful Venezuela and Ghana, per capita income is less than the levels of 1960 or before. And in 70 countries levels of incomes are less than they reached in the 1960s and 1970s.

We live in a world where the very rich are getting richer and the number of poor are increasing. To take the most extreme indicator given in this report, today the assets of the world's 358 billionaires exceed the combined incomes of countries accounting for nearly half of the world's people. In Mexico there was only one billionaire before the reformist free-market president Carlos Salinas de Cortari started in 1987 privatizing state companies. Now there are 24 and nearly all got rich on government privatization. Meanwhile, Mexico as a whole is worse off than it was in 1970. For countries like this economic decline has lasted longer and gone deeper than the Great Depression of the 1930s.

There are, however, success stories in the Third World. Human development--basic advances in health, longevity and education have risen faster in the developing countries in the last 30 years than the industrialized world achieved in over a century--life expectancy went up by 30 percent and primary school enrollment jumped from 48 percent to 77 percent. This is a remarkable accomplishment for which one gives thanks partly to modern medical science but mostly to the go-for-it attitudes of many governments and the often derided aid agencies.

Nevertheless, the name of the game at the end is combining high levels of human development, low unemployment and rapid growth in gross national product, creating a "virtuous circle" in which worker productivity rises and triggers an increase in real wages which in turn attracts more investment in human capital, in education and access to social services.

According to Professor Richard Jolly, the former deputy executive director of UNICEF who is the principal author of this year's report, the pace setters in this are the East Asian and Southeast Asian countries.

It is these countries, led by Japan, that have the best record in across-the-board human development. They have not only grown fastest they have also been those which have been most fair in their distribution of income and assets such as land and credits. Not least, they have built their growth by investing in health and education for all, however poor.

Five developing countries, in particular, stick out for their innovation over the last 30 years. One is Malaysia that instead of being traumatized by the race riots of 1969 used the bitter experience to galvanize itself into formulating a 20-year plan to promote growth and human development, reduce poverty, and racial discrimination and unemployment and improve education and health standards. The success of that 20-year plan led to a follow-up plan in 1990 which seeks to continue the winning formula of economic growth and equity.

South Korea, likewise, has gone from rags to riches in a single generation. In 1945 only 13 percent of adults had any formal schooling. By 1990 average years of schooling for all reached 9.9 years, higher than in the industrialized countries. Again, the recipe for success is a mix of economic incentives and high investment in the essentials of life.

Add to these two, Taiwan, Singapore, Hong Kong and, of course, the long-time mentor of them all, Japan, and you have in this part of the world the best living example of how to mix high rates of economic growth with equity and human development in the round.

Is there any reason why the rest of the world, in particular these 89 countries that have slid backwards, can't emulate them? The short answer is no, even if for countries like many of those in Sub-Saharan Africa new progress is not possible until they are relieved of the debt burdens they have piled up over the last 30 years. This latest UN report is a blueprint for social and economic success. Presidents and prime ministers everywhere need to make sure they read it.